The investment potential of Marks and Spencer Group Plc (LON:MKS) (MKS.L) continues to be mixed in my view. In the short term, I think there could be challenges ahead. But in the long run the company’s valuation suggests that it may deliver impressive total returns.
Regarding the short run, the FTSE 100 company is struggling to adapt to changing consumer trends in my opinion. It is not alone in this respect, with a number of UK retailers finding life difficult in an increasingly digital operating environment.
Consumers are shopping online to a greater extent than ever, and this trend seems unlikely to slow down anytime soon. With investment in omnichannel resources not always having been the priority for a number of High Street stores, they are now playing catch-up in this regard. Their progress is, of course, being held back by high business rates compared to many of their online peers.
Marks and Spencer’s financial prospects are also being held back by weak consumer confidence in the UK. This could continue over the medium term, with consumers seemingly unsure about the outlook after Brexit takes place. As a result, sales growth could be relatively limited in the coming months.
However, with the Marks and Spencer share price having a dividend yield of around 6.2% and a P/E ratio of around 12, I think that it offers good value for money at the moment. It also has a relatively loyal customer base, which could lead to improved financial and investment performance over the coming years.
While there may be further quarters of slow growth ahead and its share price could come under further pressure, I believe that the stock could deliver a recovery in the long run. Therefore, I’m cautiously optimistic about its investment potential after what has been a difficult 12-month period.